MENA Newswire News Desk: Wells Fargo has been hit with a new enforcement action from the Office of the Comptroller of the Currency (OCC) due to shortcomings in its financial crime risk management and anti-money laundering (AML) practices. The action highlights significant deficiencies, including issues related to suspicious activity monitoring, customer due diligence, and transaction reporting. Wells Fargo’s shares took a 5% dip in afternoon trading following the announcement.
The OCC’s enforcement requires the bank to secure approval before engaging in any new business tied to medium- or high-risk areas, particularly those linked to money laundering or sanctions. Despite these measures, the OCC is not imposing any monetary penalties. “We have been addressing a substantial portion of the requirements outlined in the formal agreement, and we are committed to completing the work with the same urgency as our other regulatory commitments,” Wells Fargo said in a statement.
The bank has faced ongoing scrutiny since 2016, following several scandals involving misapplied loan payments, illegal foreclosures, and unauthorized fees. The most prominent scandal involved employees opening fake accounts under customer names. Since then, the bank has paid billions in fines and has revamped its leadership to restore its tarnished reputation. Under the new enforcement action, Wells Fargo is required to establish a compliance committee comprising at least three independent members, who will oversee the bank’s corrective actions.
The committee must report its findings and progress quarterly, outlining the bank’s improvements in AML controls and other risk management practices. The action comes just months after the Biden Administration lifted a long-standing consent order placed on Wells Fargo in response to its sales culture scandal, where employees were pressured to create unauthorized accounts. The latest OCC action could complicate the bank’s efforts to have remaining regulatory restrictions, such as an asset cap imposed by the Federal Reserve, lifted.
Industry experts believe that despite Wells Fargo’s efforts to clean up its practices, this latest enforcement action shows that the bank is still under heavy regulatory scrutiny. Chris Marinac, director of research at Janney Montgomery Scott, noted, “Wells Fargo continues to undergo a lengthy cleanup process, and this move by the OCC indicates that the bank’s compliance and risk management practices remain under investigation.”
As part of the agreement, Wells Fargo is also mandated to improve its data integrity and compliance programs, while limiting its expansion into new products or services until it resolves the identified deficiencies. The bank must submit a detailed action plan to the OCC within 120 days, addressing areas such as front-line risk management and independent testing. Wells Fargo’s troubles with federal regulators continue, with this latest agreement adding another layer of oversight on its risk management practices. Despite recent stock recovery, the bank faces a challenging road ahead in satisfying regulatory demands and restoring full investor confidence.